IBM reportedly considering sale of chip manufacturing operations

Move should shed expenses without forcing IBM to exit high-end server business

IBM is considering a sale of its chip manufacturing operations, the Wall Street Journalreported last night. The company would not stop designing its own chips, however. Just as AMD outsources manufacturing of the chips it designs, IBM "is looking for a buyer for its manufacturing operations, but plans to retain its chip-design capability," according to the Journal's source.

The Financial Times reported that IBM appointed Goldman Sachs to "sound out possible buyers for the business" and that "IBM is not wedded to the idea of selling and could also seek a partner with which to create a joint venture for its semiconductor operations." Potential buyers mentioned in that report include GlobalFoundries (originally an AMD spinoff) and Taiwan Semiconductor Manufacturing Company (TSMC).

Operating chip manufacturing plants is expensive, even for companies as large as IBM. The Journal noted that "[c]hip manufacturing is a very capital-intensive and volatile business" and that selling that portion of its operations could help IBM boost its profitability. "Besides the cost of chip factories and equipment, which frequently run into billions of dollars, IBM and other companies spend heavily on developing new production recipes to keep improving the performance, data-storage capacity, and cost of chips."

While IBM made the chips for Sony's PS3 and Microsoft's Xbox 360, those companies have opted for AMD silicon in their new systems. IBM chips still power the Wii U console.

Financial research firm Sanford C. Bernstein estimated that IBM's chip manufacturing "generated about $1.75 billion in revenue last year, while losing $130 million in pretax income," the Journal report said.

An IBM spokesperson told Ars this morning that "IBM does not comment on rumors or speculation."